STRATEGIC MANAGEMENT

INTRODUCTION:One can spontaneously say that the strategic management is the process of management of strategic decision making,implemention and control .It is not complete meaning of strategic management as it fails to cover many important aspects of strategic management. DEFINITION:Strategic management is concerned with deciding on strategy & planning how that strategy is to be put into effect. Strategic management is a continuous, iterative cross functional process aimed at keeping an organization as a whole appropriately matched to its environment. Samuel C.Certo & J.Paul Peter.

Strategic Analysis Strategic choice Strategic Implementation Evaluation Process Strategic management is the continuous process of effectively

relating the organizations objectives & resources to the opportunities in the environment.

Schellenberger & Bosenan

NEED FOR STRATEGIC MANAGEMENT:i) ii) iii) iv) v) vi) vii) ix) Due to change To provide guidelines. Developed field of study by research. Probability for better performance. Systematizes business decision Improves communication Improves coordination Helps the managers to have a holistic approach.

viii) Improves allocation of resources.

BENEFITS OF STRATEGIC MANAGEMENT: i) ii) iii) iv) v) vi) vii) Strategic management helps an organization to be proactive rather than reactive. It encourages the organization to decentralize the management process involving lower level managers & employees. It often brings order & discipline to a firm. It provides an objective, view of management problems. It represents a framework for improved control of activities. It minimizes the effects of adverse conditions & changes. It gives encouragement to forward thinking.

viii) It encourages favorable attitude towards change.

STRATEGIC MANAGEMENT PROCESS STEPS:

Idenifying, defining business mission purpose & objectives

Environmental Analysis

Revise organizational direction

Strategic Evaluation & control

Strategy implementation

Alternative strategic choice

TYPES OF STRATEGIS MANAGEMENT :Grand Strategies

A) Stability Strategy I) Maintenance of status quo. II) Sustainable growth.

A) Stability Strategy I) internal growth II) Concentration strategies III) Mergers IV) Takeovers/ Acquisition V) Horizontal Integration VI) Conglomerate diversification VII) Vertical Integration VIII) Joint ventures

C) Retrenchment Strategy I) Turnaround II) Captive co. III)Transformation IV) Divestment V) Liquidation

D) Combination Strategy I) Portfolio II) Restructuring

A) Stability strategy: Firm adopt the stability strategies due to the following reasons:i) ii) iii) iv) Managers of small business desire a satisfactory level of profits rather than increased profit. Maintenance of status quo involves less risk than a more growth strategy. Change of any form may disrupt the current working relationships & the consequences may be detrimental to the organization. Some executives maintain with the stability strategy due to inertia for change. There is also grater risk, cost and profit potential as well as greater need for flexibility associated with corporate level strategic activities. Major financial policy decisions involving acquisition, diversification and structural redesigning belonging to the category of corporate strategy. Aspects of Corporate Strategy :Corporate Strategy has two main aspects I) II) Formulation of strategy of strategic planning Strategy implantation. Formulation of strategy involves : Determination of objectives, purposes & goals Formulation of principal policies , plans & Specification of the business the company intends to be in.

Salient features of Grand Strategies:Stable Growth Strategy:Stable growth strategy implies that the company will continue in the same or similar objectives. Features 1. There is no major change in the product or service line,markets or functions. 2. The focus is on maintaining and developing competitive advantages consistent with the present resources and market requirements 3. The rate of improvement continuing in the past is sustained. Variants Incremental sub strategy: Growing but surely with a strong base. Sustainable growth strategy: Slow growth rather than stable growth.:

Growth strategy:When a firm increases the level of objectives higher than what it has achieved in the immediate past, in terms of market share, sales revenue etc. it is said to be growth strategy.

Features :1. Increase in profit 2. Increase in sales. 3. Growth in market share. 4. Increase in performance objectives Variants :Internal growth : Increasing the sales revenue, profits and market share of existing product line. Diversification strategy:Adding new products/Markets Horizontal :- parallel new products/services Concentric: New product similar to technology, market, customer etc Conglomerate: Dissimilar products Backward: Addition of activties to ensure the supply of firms present inputs. Forward : Higher upin the production process towards the end consumer. Mergers Takeovers Joint ventures Vertical :-Complementary to existing products.

Retrenchment strategy : A strategic option, which involves reduction of any existing product or service line along with the level of objectives set below the past achievement, is known as retrenchment strategy. Features: i) ii) iii) Defensive strategy Negative cash flows Cutting down operations

Variants:i) ii) iii) iv) v) Turnaround : Improving internal efficiency. Surgical & HRD approach Divestment : Selling of business unit. Liquidation : Selling off or closing down firm and selling its assets Captive company: To avoid risk of manufacturing & labor costs Transformation : Moving from one kind of business to another.

COMBINATION STRATEGY: As the name implies as combination strategy is one in which there is conscious use of different strategies for different units on divisions at the same time.In other words, a mix of two or more basic strategies at the same time in different segments of the organization or using different basic strategies for the same segment at different stages. The combinations at a point of time may bepossible

i) ii) iii) iv) Reasons:

Stable growth & Retrenchment Stable growth & Growth Retrenchment & Growth Retrenchment , Stable growth & Growth

A company may pursue the combination strategy for one or more of the following reasons a) Different products in different stages of life cycle b) Industrial recession c) Size of the firm STRATEGIC EVALUATION & CONTROL:The basic premise of strategic management is that the chosen strategy will achieve the organization objectives. The possibility of this not occurring gives rise to the need for strategic control process. Although our heading suggests that two things eg. Evaluation & control are involved but, in fact, evaluation concept is the part of a much larger control concept. Definition Of Control :Control consists of making something happen the way it was planned to happen. Control consists in verifying whether everything occurs in conformity with the plan adopted, the instructions issued & principles established. HENRY FAYOL

The control function includes three procedures viz, I) II) III) Measuring actual performance Comparing actual performance Taking corrective action to ensure that planned events actually occur.

General model of Control Process

Work continues

No corrective action necessary

Performance equivalent to standards

Controlling Begins

Measure of performance

Compare measurement to standard

New work situation begins

Take corrective action, change plans,organisation

Performance significantly different from stds

Types of control:Three types of control viz; preliminary control ,concurrent control & feedback control.

Human,material capital & financial resources acquired & combined in organization

Within which planned activity occurs

Leading to result achieved

Preliminary control

Concurrent control

Feedback control

Purposes of strategic control :The purpose of strategic control are to answer the questions such as i) ii) iii) iv) v) vi) vii) ix) Are our internal strengths still holding good? Have we added other internal strengths? Are our internal weaknesses still holding goods? Do we have other weaknesses? Are our opportunities still opportunities? Are there new opportunities? Are our threats still existing? Are goal & targets being met?

viii) Are there new threats?

Thus strategic control provides feedback about various steps of strategic management to know, whether the strategic management processes are appropriate, compatible & functioning in the desirable direction. Process of strategic control:the strategic control process consists of six steps top management , initially must decide what elements of the environment & the organization need to be monitored. STRATEGIC EVALUATION:The responsibility of top management does not end with the formulation of a grand strategy,functional & operational plans & organizational plans but strategies beyond it to encompass the task of evaluation of strategy.This is due to the fact thata company to survive & grow successfully must assess effectiveness of strategy in achieving desired results & its suitability in changing environmental forces. Purposes of strategic evaluation :The purpose of strategic evaluation are to answer the question such as, i) ii) iii) Are the decisions being made consistent with policy? Are there sufficient resources to get the job done? Are the resources being used wisely?

iv) v) vi)

Are events in the environment occurring as anticipated/ Are goals & targets being met? Should we proceed with the plan as we originally formulated or it needs some revision? Before we proceed to he actual process of strategic

evaluation i.e. why & what aspects Process of strategic evaluation :The process of evaluation basically deals with four steps: 1. setting standards of performance 2. Measurement of performance 3. Analyzing variances 4. Taking corrective action. These are four elements of the evaluation process & how they relate to each other , are depicted in following diagram

Process of strategic evaluation

Strategy / plans / objectives
R e f o r m u l a t e

Setting standards of performance

C H E C k S T D S

Actual perfomance

Measureme nt performance

C H E C k

perform anance

Analyzing variances

Techniques of strategic evaluation:(A) Evaluation techniques for strategic control 1) Strategic momentum control :-There are three techniques which could be used to achieve these aims i) Responsibility control centers ii)Underlying success factor iii) Generic strategies.

2) Strategic leap control:- There are four techniques of evaluation used for exercising strategic leap control i)strategic issues management ii)strategic field analysis iii)systems modeling iv)scenarios (B) Evaluation techniques for operational control 1)Financial techniques ;-There are several techniques such as 2)Network technique 3)Management by objectives (MBO) 4)Memorandum of understanding Changes in environment: Information system Control system Appraisal system Motivation system Development system Planning system Budgetory control Zero based budgeting Financial analysis

Pareto system

How would you assess THE EFFECTIVNESS OF STRATEGY OF AN ENTERPRISE? OR How is PERFORMANCE EVOLUTION DONE IN PUBLIC ENTERPRISES IN INDIA Effectiveness of strategy i) ii) iii) iv) v) vi) vii) Making strategy with objectives Making strategy with environmental forces Making strategy with corporate strategy Strategy & personal values of management Matching strategy with operating plans & programmes Making strategy with current performance Strategy & organizational motivation.